02087cam a22002537 4500001000600000003000500006005001700011008004100028100001800069245012900087260006600216490004100282500001400323520109200337530006101429538007201490538003601562700002201598700002201620710004201642830007601684856003701760856003601797w3357NBER20150802190155.0150802s1990 mau||||fs|||| 000 0 eng d1 aKing, Mervyn.10aVolatiltiy and Links Between National Stock Marketsh[electronic resource] /cMervyn King, Enrique Sentana, Sushil Wadhwani. aCambridge, Mass.bNational Bureau of Economic Researchc1990.1 aNBER working paper seriesvno. w3357 aMay 1990.3 aThe empirical objective of this study is to account for the time-variation the covariances between markets. Using data on sixteen national stock markets, we estimate a multivariate factor model in which the volatility of returns is induced by changing volatility in the orthogonal factors. Excess returns are assumed to depend both on innovations in observable economic variables and on unobservable factors. The risk premium on an asset is a near combination of the risk premia associated with factors. The main empirical finding is that only a small proportion of the time variation in the covariances between national stock markets can be accounted for by observable economic variables. Changes in correlations markets are given primarily by movements in unobservable variables. We also estimate the risk premia for each country, and are able to identify substantial movements in the required return on equity. Our results also suggest that, although inter-correlations between markets have risen since the 1987 stock market crash this is not necessarily evidence of a trend decrease. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.1 aSentana, Enrique.1 aWadhwani, Sushil.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w3357.4 uhttp://www.nber.org/papers/w335741uhttp://dx.doi.org/10.3386/w3357